Force Majeure: We’ve Heard of it, but What Does it Actually Mean?

Force majeure has never been more prevalent in commercial contracts and leases than it was following the COVID-19 pandemic. Prior to 2019, force majeure provisions could often be found buried in the back of a contract and were hardly, if ever, discussed in negotiations. We’re all familiar with the language “acts of god, war, terrorism, riots” and of course, recently, “epidemics, pandemics, and governmental orders,” but practically speaking, what does force majeure mean? Under what circumstances is a force majeure provision actually helpful?

Force majeure provisions can allow either or both parties to extend time limits for performance under a contract if circumstances beyond the control of the impacted party prevent timely performance, but only if such circumstance is expressly addressed in the provision. This means that the force majeure provision should be expansive to specifically list each circumstance that would allow a contracting party to rely on it. Additionally, the provision should clearly state the performance that is excused, the impacted party’s obligations (notification and/or mitigation), and the other party’s remedies. Often, the provision will require that such an impacted party provide notice to the other party. While this may seem obvious enough, a party in the middle of a force majeure event is likely working to remedy the situation rather than reviewing its contracts to ensure compliance with notice requirements.

Another important aspect of force majeure is the element of foreseeability. Force majeure provisions should allocate the risk of specified events regardless of their foreseeability because there are circumstances that, while unlikely or unpreventable, could nevertheless be foreseen as a possibility. Are hurricanes a possibility on the Gulf Coast of Texas? Are tornadoes a possibility in Oklahoma? Of course, but the possibility doesn’t make the detrimental effects left on operations any easier.

In most cases, courts will follow logic and not apply the common law foreseeability requirement if they recognize the parties have unambiguously drafted the force majeure clause to agree that the specified event may prevent or delay performance. However, courts may inquire into foreseeability to determine whether the catch-all language in the force majeure provision captures events that are not specifically listed.

RR&A is here to help you navigate through drafting force majeure provisions and utilizing them when needed. For a more in-depth analysis on declaring force majeure, check out our previous article, “Best Practices When Declaring Force Majeure.”

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